EUR/USD – Stable Ahead of ECB Statement

EUR/USD is stable on Thursday, as the pair trades in the low-1.26 range in the European session. On the release front, Spanish Unemployment Change climbed to 19.7 thousand but still beat the estimate. Eurozone PPI posted another weak reading, coming in at -0.1%. The ECB will set its interest rate for October later in the day, followed by a press conference with Mario Draghi. In the US, today’s highlight is Unemployment Claims. The markets are expecting the indicator to rise slightly to 299 thousand.

At its last meeting, the ECB reduced its benchmark interest rate to 0.05% and introduced negative deposit rates, but this dramatic moves have done little to raise inflation and growth rates as the Eurozone economy continues to sputter. No changes are expected in interest rates this month. The ECB is feeling the pressure to take further measures, but as Mario Draghi knows all too well, there isn’t any magic formula to creating inflation and improving economic growth. The ECB head has pledged to introduce an asset-backed securities (ABS) scheme starting this month, but the markets have low expectations, anticipating asset purchases to be modest. Traders should be prepared for some movement from EUR/USD following the ECB statement and press conference.

In the US, ADP Nonfarm Payrolls surprised with a strong gain, climbing to 213 thousand, compared to 204 thousand in the previous release. This beat the estimate of 207 thousand. The ADP release precedes the official NFP release, which will be published on Friday. The markets are anticipating a sharp gain, with an estimate of 216 thousand. If the indicator does follow suit with a solid reading, the US dollar could post further gains against its major rivals.

On the manufacturing and housing fronts, this week’s numbers were disappointing. ISM Manufacturing PMI fell to 56.6 points, down from 59.0 points a month earlier. US Pending Home Sales posted a decline of 1.0%, compared to last month’s gain of 3.3%. On Friday, we’ll get a look at ISM Non-Manufacturing PMI, with the markets braced for a softer reading for September.

EUR/USD for Thursday, October 2, 2014

EUR/USD October 2 at 9:25 GMT

EUR/USD 1.2640 H: 1.2674 L: 1.2614

EUR/USD Technical

• EUR/USD moved higher in the Asian session, climbing close to resistance at 1.2688. The pair has since retracted.
• 1.2518 is providing strong support.
• 1.2688 is a weak resistance line. 1.2806 is stronger.
• Current range: 1.2518 to 1.2688

Further levels in both directions:

• Below: 1.2518, 1.2407, 1.2286 and 1.2144
• Above: 1.2688, 1.2806, 1.2905, 1.2984 and 1.3104

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Thursday. This is consistent with the pair’s movement, as the euro has shown little net movement. The ratio has a slight majority of long positions, indicative of trader bias towards the euro breaking out and moving to higher ground.

GBP/USD Fundamentals

• 7:00 Spanish Unemployment Change. Estimate 31.3K. Actual 19.7K.
• 9:00 Eurozone PPI. Estimate -0.2%.  Actual -0.1%.
• Tentative – Spanish 10-year Bond Auction.
• Tentative – French 10-year Bond Auction.
• 11:30 US Challenger Job Cuts.
• 11:45 ECB Minimum Bid Rate. Estimate 0.05%.
• 12:30 ECB Press Conference.
• 12:30 US Unemployment Claims. Estimate 299K.
• 14:00 US Factory Orders. Estimate -9.4%.
• 14:30 US Natural Gas Storage. Estimate 107B.

* Key releases are highlighted in bold

*All release times are GMT

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